Reuters: European powers will offer Iran a deal next week in a final bid to persuade the Islamic republic to end its suspected arms-related nuclear programmes or face possible sanctions, the United States says. The announcement on Friday came after a meeting of the Group of Eight industrial powers in Washington where Britain, France and Germany presented a package of "carrots and sticks" ... Reuters

By Carol Giacomo and Saul Hudson

WASHINGTON - European powers will offer Iran a deal next week in a final bid to persuade the Islamic republic to end its suspected arms-related nuclear programmes or face possible sanctions, the United States says.

The announcement on Friday came after a meeting of the Group of Eight industrial powers in Washington where Britain, France and Germany presented a package of "carrots and sticks" aimed at pressing Iran to halt uranium enrichment and other activities that could enable it to build a bomb.

Washington has accused Iran of secretly developing nuclear arms. U.S. officials predict Iran could have a nuclear weapon in three to five years and the issue is among the priorities facing whomever is elected America's president on November 2.

Iran insists its nuclear programme is for peaceful energy purposes only,

The Bush administration opposes deal-making with "axis of evil" states such as Iran, North Korea and prewar Iraq.

But it acquiesced in the initiative on the expectation that if Iran rejects it, G8 states will be united in having the November 25 meeting of the International Atomic Energy Agency (IAEA) refer the issue to the U.N. Security Council, where sanctions could be imposed.

"The EU three indicated they will be presenting their idea to Iran next week," State Department spokesman Tom Casey said, referring to Britain, France and Germany.

Some U.S. officials continue to have serious reservations about going along with the Europeans.

Others said they still were not sure if Russia, a key player in Iran's nuclear ambitions, was on board. Moscow may be waiting for results of the EU talks with Iran and the next IAEA report on Iran's programme.

'NONCOMPLIANCE'

"Is it worth another effort to tell the Iranians they ought to comply now with IAEA obligations? Sure, but we don't think the Iranians are going to do it. I'm afraid the Iranians show every sign of persisting in their noncompliance," a senior U.S. official said.

The European offer includes a commitment to resume stalled talks on an EU-Iran trade agreement and guarantee Iran access to Russian nuclear fuel, diplomats said.

Although the Security Council can impose sanctions, U.S. officials say they would start with lesser penalties.

The United States is growing frustrated that the IAEA has failed to refer the issue to the security council, something Iran has lobbied vigorously to prevent.

The EU Three did not expect outright U.S. support for the initiative, nor did they get it.

At the meeting, "we reaffirmed our view today and we also emphasised to our G8 partners that Iran should not be allowed to defy any longer the requirements and requests called for in the past five IAEA board resolutions," the State Department's Casey said.

A European diplomat told Reuters, "The mood at the end of the meeting was that the EU Three will go ahead with their proposal and the U.S. did not object to that."

Differences remained.

"There have never been identical points of view and there was no expectation any government would change its point of view." said a European official who attended the meeting.

EU officials acknowledge that Europe alone cannot offer Iran big enough incentives to abandon its suspected arms-related activities, without the prospect of the United States ending its isolation of Tehran.

Democratic White House candidate Senator John Kerry is interested in a deal and some U.S. officials are thinking about how to move in that direction if a new president asks for advice.

But Bush hawks advocate isolating and punishing Iran, and some influential U.S. neoconservatives argue for "regime change" in Tehran.